The Conference Board LEI for Japan fell for the fourth consecutive month in March. Business confidence (which deteriorated for the first time in a year), new orders for machinery and construction, and dwelling units started made the largest negative contributions to the index this month. With March’s decline, the leading economic index remained unchanged from September 2013 to March 2014, a considerable decline from the growth of 4.9 percent (about a 10.1 percent annual rate) in the previous six months. However, the strengths among the leading indicators continued to be more widespread than the weaknesses.

The Conference Board CEI for Japan, a measure of current economic activity, increased in March, with sales, employment and industrial production contributing positively to the index. For the six-month period ending in March, the coincident index grew by 1.0 percent (about a 2.1 percent annual rate), an improvement from no growth in the previous six months. In addition, the strengths among the coincident indicators continued to be widespread. At the same time, real GDP growth was 0.6 percent (annual rate) in the fourth quarter of 2013, down from 0.9 percent (annual rate) in the previous quarter.

The Conference Board LEI for Japan continues to decline, and as a result has not grown over the past six months. Meanwhile, The Conference Board CEI has increased over the same time period and its six-month growth rate has moderately improved. Despite the recent improvements in the CEI, the deterioration in the LEI since December 2013 suggests that the risk of a contraction in the coming months is increasing.

LEADING INDICATORS. Three of the ten components that make up The Conference Board LEI for Japan increased in March. The positive contributors to the index – in order from the largest positive contributor to the smallest – include the index of overtime worked, the interest rate spread and (inverted) business failures. The negative contributors – in order from the largest negative contributor to the smallest – include the Tankan business conditions survey, the new orders for machinery and construction component*, dwelling units started, real money supply, stock prices, and the six-month growth rate of labor productivity. Real operating profits* remained unchanged in March.

With the decrease of 0.3 percent in March, The Conference Board LEI for Japan now stands at 100.3 (2004=100). Based on revised data, this index decreased 0.2 percent in February and declined 0.3 percent in January. During the six-month span through March, the index was unchanged, and eight of the ten components advanced (diffusion index, six-month span equals 80.0 percent).

COINCIDENT INDICATORS. Three of the four components that make up The Conference Board CEI for Japan increased in March. The positive contributors to the index – in order from the largest positive contributor to the smallest – include the retail, wholesale, and manufacturing sales* component, number of employed persons and industrial production. The wage and salary income remained unchanged in March.

With the increase of 0.5 percent in March, The Conference Board CEI for Japan now stands at 97.3 (2004=100). Based on revised data, this index decreased 0.2 percent in February and increased 0.3 percent in January. During the six-month span through March, the index increased 1.0 percent, and three of the four components advanced (diffusion index, six-month span equals 75.0 percent).

DATA AVAILABILITY AND NOTES. The data series used to compute The Conference Board Leading Economic Index® (LEI) for Japan and The Conference Board Coincident Economic Index® (CEI) for Japan reported in this release are those available “as of” 3:00 P.M. ET May 5, 2014. Some series are estimated as noted below.

* The series in The Conference Board LEI that are based on our estimates are the six month growth rate of labor productivity, real operating profits and new orders for machinery. The series in The Conference Board CEI that is based on our estimates is real manufacturing sales.

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING,
OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.

Working Papers on The Conference Board Leading Economic Index® for the United States